Why we pay nearly four times more for medicine

Australians are paying about 3.7 times more for common prescription drugs compared with the cheapest world prices, a think tank has revealed.

The Grattan Institute reported on Sunday that our drug prices are more than twice as high as the United Kingdom and 3.6 times more expensive than New Zealand.

As an example, a box of 30 1mg tablets of breast cancer drug anastrozole (Arimidex) costs $19.20 in Australia, compared to just $2.45 in the UK.

The report relates to the Pharmaceutical Benefits Scheme (PBS), a federal government program that subsidises prescription drugs. The government is getting ripped off when it pays for these medicines, which means patients end up paying far more than they should, according to the Institute.

“Australia is buying and pricing its drugs the wrong way. Fixing this policy would give patients a better deal and improve the budget bottom line,” Grattan Institute health expert Stephen Duckett, author of the report, said.

Because of these higher prices, about 8 per cent of Australians over the last 12 months didn’t get, or deferred getting, prescribed drugs because they couldn’t afford them, the report found.

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The Grattan Institute said the government could save $500 million a year — and charge us less — by reforming the ‘price disclosure’ and ‘therapeutic group premium’ policies.

Specifically, the government should benchmark the wholesale prices of generic drugs against international peers, close “loopholes” it claims allow pharmaceutical companies to overcharge for marginal improvements in drugs, and relax pharmacy location and ownership rules that allegedly “stifle competition”.

Under ‘price disclosure’, introduced in 2007, drug companies have to tell the government what they are charging pharmacies, including any discounts. Previously, they didn’t disclose these discounts.

The disclosure policy is working but not fast enough, the report found. The government could save a further $93 million a year if it cracked down harder.

The ‘therapeutic group premium’ is also “full of loopholes and no longer works”, the report found. The policy, introduced in 1998, was supposed to stop the government wasting money on over-priced drugs that are chemically different but treat the same conditions.

Currently, the government will only subsidise the cheapest drug in a ‘therapeutic group’. The consumer pays extra if they choose another drug in the group.

But Australia has only seven groupings, compared to 30 in Germany. And the groupings we do have are “too conservative”, according to the report, at a saving of more than $445 million a year.

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